Intel Founder: Detroit Can Learn From Silicon Valley

The government is investing billions of dollars in GM and Chrysler, hoping for radical change in the way cars are made.

But as leading personal computer producers learned decades ago, it takes more than two companies to change an industry, Intel Corp. founder Andrew S. Grove wrote in The Wall Street Journal.

"The transformation of an entire industry does not happen very often," Grove wrote in an opinion piece. "It only occurs when a number of factors align, such as a change in consumer demand, a shift of parts of the major supply chain from one country to another, and the emergence of key technological change."

This is what happened to the computer business during the 1980s and 1990s. The advent of the personal computer was the technological change that led to key strategic shifts in the industry. New kinds of companies emerged such as Compaq and Dell, and older firms Burroughs and Digital Equipment passed from the scene.

"A single company cannot call the shots that transform an industry," Grove wrote.

With the Obama administration getting involved in the restructuring, and partial ownership of GM and Chrysler, there is the distinct possibility that the needed change may not emerge organically.

"Imagine, if in the middle of the computer transformation, the Reagan administration worried about the upheaval and tried to rescue this vital industry by making huge investments in mainframe companies," Grove wrote. "The purpose would have been to protect the viability of those companies."

The car industry is failing not because of the global recession, as difficult as that might be. There are other changes afoot, the globalization of auto manufacturing, technological change involving the automobile, and rising fuel costs. These changes might well lead to real demand for a viable electric car.

The key to saving GM and Chrysler is not pumping billions of dollars into the companies, Grove wrote. What is needed is to see which automaker can take advantage of new technology, and mass produce cars more cheaply and with greater fuel efficiency than rivals, he said. This kind of competitive edge can’t be mandated by government.

"The U.S. government is investing in the automobile industry with the intention of preventing jobs from being lost," Grove wrote. "This may improve GM's ability to operate within today's structure. But there is no comparably large investment being made to develop the capabilities that could serve the company in the new era of electric cars."

The government is investing billions of dollars in GM and Chrysler, hoping for radical change in the way cars are made.But as leading personal computer producers learned decades ago, it takes more than two companies to change an industry, Intel Corp. founder Andrew S. Grove...